Money Debt-to-household-income ratio rises in Q3

16:07  15 december  2017
16:07  15 december  2017 Source:   msn.com

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The ratio of debt to disposable income rose to 171.1 percent from an upwardly revised 170.1 percent in the second quarter. On a seasonally adjusted basis, households borrowed C.4 billion (.3 billion) in the third quarter, down from C.7 billion in the preceding quarter.

Aggregate Debt - to - Income Ratio Figure 1 panel 1 shows aggregate nationwide DTI for the United States, as reported in the Financial Accounts, and figure 1 panel 2 shows the growth rates of personal consumption expenditures (PCE). Together, these panels suggest a connection between household

OTTAWA - The amount Canadians owe relative to their income hit a new high in the third quarter.

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Household debt is defined as the combined debt of all people in a household . It includes consumer debt and mortgage loans. A significant rise in the level of this debt coincides historically with many severe economic crises and was a cause of the U.S. and subsequent European economic crises of

The ratio of household credit market debt to income rose to 163.7 percent in the third quarter from a downwardly revised 162.7 percent in the second quarter, Statistics Canada said on Monday.

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Statistics Canada said Thursday that household credit market debt as a proportion of household disposable income increased to 171.1 per cent, up from 170.1 per cent in the second quarter.

That means there was $1.71 in credit market debt, which includes consumer credit and mortgage and non-mortgage loans, for every dollar of household disposable income.

Benjamin Reitzes, Canadian rates and macro strategist at the Bank of Montreal, said the upward trend in household debt continues unabated.

"And, with homebuyers rushing to get into the market ahead of the new OSFI rule change that takes effect on Jan. 1, 2018, we could see a further increase in Q4," Reitzes wrote in a report.

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Your debt to income ratio , or DTI, tells lenders how much house you can afford and how much you’re eligible to you borrow. The ideal DTI ratio is around 36%. Use our DTI calculator and find out how to reduce your DTI ratio if it’s too high.

(Strengthening household asset values outpaced debt accumulation and the debt - to - income ratio rose to a record high of 163.7% in Q 3 /13). With debt levels remaining historically elevated and continuing to rise

"However, that suggests we could see some flattening out of the ratio in 2018 — though don't bet on it as housing has been persistently resilient."

Household debt is often cited as a key risk to the Canadian economy by the Bank of Canada and others.

In a report last month, the OECD said high house prices and associated debt levels remain a substantial financial vulnerability in Canada.

"A disorderly correction would adversely impact growth and could threaten financial stability," the organization said.

Statistics Canada said the household debt service ratio, measured as total obligated payments of principal and interest as a proportion of household disposable income, was relatively flat at 13.9 per cent, while the interest-only debt service ratio was 6.3 per cent, down from 6.4 per cent in the previous quarter.

The Bank of Canada has raised its key interest rate target twice this year, moves that have led to increases in the prime rates at the country's big banks used to set loans like variable-rate mortgages.

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Debt - to - household - income ratio rises in third quarter to 171 per cent.

While the household debt - to - income ratio provides an indication of household indebtedness and facilitates international comparisons, it provides a Household debt-servicing capacity will become stretched further as interest rates rise to “normal” levels over the next five years. By the end of 2020

Royal Bank economist Josh Nye noted the debt service ratio will increase as the Bank of Canada continues to gradually raise interest rates.

"However, the prevalence of fixed rate mortgage debt means households won't feel the increase all at once," Nye wrote.

"Rather, as today's data showed, the debt service ratio is likely to rise only gradually."

Total household credit market debt grew to $2.11 trillion in the third quarter, up 1.4 per cent from the previous quarter. The increase came as mortgage debt increased 1.5 per cent to $1.38 trillion, while consumer credit rose 1.2 per cent to $620.7 billion.

Meanwhile, the total net worth of the household sector edged down 0.1 per cent to $10.61 trillion in the third quarter.

The move lower was due to a drop in home values as housing resale prices weakened. The value of household financial assets edged up 0.1 per cent.

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